Global growth set for decline, as ballooning government debts take hold
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So rising trade tensions, sticky inflation and ballooning government debt aren't helping the global economy. That's the warning from the OECD in its latest economic outlook. Growth is forecast to slow, living standards are under pressure and the organisation says protectionism is making things worse. So what can governments do to turn things around? Well, the OECD's chief economist is Alvaro Pereira and he can tell us. Hello.

Hello, morning. Good morning. So this forecast paints quite a bleak future in terms of global growth and you place the problem...

pretty squarely at the tariffs and trade barriers. So how concerned are you that we're heading towards a worldwide economic crisis? Well, we are forecasting that basically we're downgrade for almost everybody. Times are definitely challenging. There's been a significant increase in trade uncertainty. Business and consumer confidence have come down. We are forecasting still that the world economy will continue to be fairly resilient, growth of about 2.9% this year and the next.

There's some countries that are more vulnerable to tariffs than others, aren't there? Well, the countries that were subject to the biggest downgrade of our forecasts are the ones that are more affected by tariffs. That means the United States, Canada, Mexico, those are the ones that are so integrated. But other countries also, of course, they have significant downgrades, especially if they are very dependent on trade for them to grow. The report says governments should really revive growth. What does that really mean in practice? Well,

Well, first and foremost, avoid further trade fragmentation. That's the most important policy recommendation right now. Secondly, we think that reviving investments should be a top priority. Since the global financial crisis, just to give you an idea, there's been a downfall of investment about 22%. So policies to boost investment will be key. Now, you're talking about investment, but you're also warning about rising public debt. And you're also calling for more fiscal discipline at the same time, not

aren't you? Absolutely. And we have right now the highest debt levels that we've seen in this time for about 80 years. You know, it doesn't matter if you're a poor country, a small country, basically, or if you're rich or poor, that is fairly high. And the expenditure pressures are increasing. But just to return to what we were talking about at the start, some countries are more vulnerable to tariffs.

than others. And we're just a day away from President Trump introducing 50% tariffs on imported steel. So does the OECD have a message for the president? We have a message for every country that we have witnessed in the past few decades, a historic decline in poverty rates around the world,

and a big increase in living standards in every single country, thanks to more trade, less trade barriers, and technological development. We think right now the top priority should be for countries to get together, continue dialogue, and in particular to reach trade agreements.

so that we bring more jobs, more prosperity and a better future for our people. OECD Chief Economist Alvaro Pereira, thank you so much for joining us in Marketplace. Thank you. It was my pleasure. Now let's do the numbers. ♪

Global markets are mixed because of fresh trade war jitters, but hopes of direct talks between President Trump and China's President Xi Jinping have helped steady sentiment. China's CSI 300 index is up three-tenths of a percent, but Europe's Stock 600 index is down four-tenths of a percent. Oil prices also climbed, driven by a weaker dollar and new fears over the war in Ukraine.

Now, the Chinese shopping app Timu is feeling the sting of the US-China trade war. New data from the market intelligence and analytics company Sensor Tower shows it lost over half of its daily users in the US last month. That drop comes after the White House scrapped a loophole known as De Minimis, which let overseas retailers ship small packages to American shoppers duty-free. Here's the BBC's Katie Silver. Timu, along with its rival Shein, have really felt threatened

the heat from President Trump's trade war. President Trump, of course, announcing that these goods would attract a tariff rate, which at the start of May was up to 145% on products made in China. They also started charging $100 per parcel and said that they were going to be increasing that to $200 per parcel.

And that all but wipes out the business models of both Shein and Temu. Sometimes they sell things like skirts or outfits for as low as $3 or $4. So if you're paying potentially up to $200 in addition to that, these companies have really, really felt that pressure. So Temu, for example, we saw it slashing advertising spending, instead trying to spend more in Europe to get more customers there, as well as announcing that they were going to be moving production and fulfillment to the U.S. in order to try and avoid some of these costs.

Katie Silver there. Meanwhile, Tesla won't be making cars in India, according to the country's heavy industries minister. He says Elon Musk's firm isn't joining a new scheme to boost electric vehicle production. Tesla will open showrooms, but not factories.

Now, the UK government is threatening legal action against Russian billionaire Roman Abramovich over the $3.3 billion raised from the sale of Premier League soccer club Chelsea. Abramovich was sanctioned by the British government following Russia's full-scale invasion of Ukraine and was forced to sell the club he had owned for almost two decades.

The money was meant to go towards humanitarian aid for Ukraine, but the UK's finance and foreign ministers have now said they'll take the matter to court if there's no deal. The BBC's Faisal Islam reports. For three years, the proceeds from the sale of Chelsea have been held in a frozen bank account, awaiting an agreement on the use of the funds.

Since the sale, Mr Abramovich has maintained that the proceeds should benefit all the victims of the war in Ukraine, inferring those on the Russian side should be included. Aid funding for Ukraine could soon be under pressure from budget cuts, both here in the UK and the US, increasing the pressure to release the long-frozen funds. That was Faisal Islam reporting, and I'm Leanna Byrne with the Marketplace Morning Report from the BBC World Service. Have a great day. Thanks so much for listening.

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